BUSINESS body IBEC has urged the Government to ease back on this year's €3.1bn Budget target by abandoning plans for further tax increases.
But the group says further slashing of public-sector pay must remain on the to-do list.
The Government must claw back another €5.1bn in tax hikes and spending cuts over the next two years under its plan to cut the Budget deficit to below 3pc of the value of the economy by 2015.
It beat deficit targets last year and is expected to do so again this year. If its sticks with its austerity plan, the deficit is estimated to be reduced to 2.2pc of GDP by 2015 – well within the 3pc target. But IBEC chief economist Fergal O'Brien said the economy and consumers had been "taxed enough".
In its latest quarterly forecast, IBEC said the budgetary adjustment this year should be less than the planned €3.1bn.
"We need to press ahead with reducing public-sector expenditure, but taking more money out of the economy through tax hikes is the wrong way to go," said Mr O'Brien.
"Fixing the public finances can only bring us so far; consumers need to see that the end is in sight before they will start spending again."
IBEC forecasts GDP growth of 1.8pc this year, but warned economic performance in the first quarter had been weaker than expected, with fragile consumer confidence, the European economic slowdown and poor weather impacting on consumer spending.
Key forecasts from the quarterly economic outlook include:
• GDP growth at 1.8pc this year.
• Consumer spending to increase 0.2pc this year and 0.7pc in 2014.
• Economic investment to jump 7.1pc in 2013 and 13.3pc next year.
• Unemployment to fall modestly to 13.9pc this year and to 13.3pc in 2014.
• Inflation to increase by an average of 1.3pc in 2013 and by 1.9pc in 2014.
Mr O'Brien said the deal on the promissory notes and the extensions of the repayment period on some of Ireland's European bailout loans had given the Government some room for manoeuvring.
"The Government should now abandon plans to introduce an additional €500m in new taxes at the next Budget," he said.
"The economy and Irish workers are already taxed enough, the focus should be on ways to reduce the tax burden.
"Accordingly, the budgetary adjustment should be less than the €3.1bn targeted."
IBEC said abandoning the tax hikes would still leave Ireland hitting a Budget deficit of about 4.5pc next year.
"An adjustment of this order is sufficient to show that Ireland is serious about closing the deficit, while limiting the damage to the economy and growth," Mr O'Brien said.
"It would be a tangible dividend for householders and would be a significant boost to the domestic economy," he added.